European shares stay near highs as Spanish sell-off eases

LONDON/MILAN (Reuters) - European shares hovered around three-month highs on Tuesday as a sell-off in Spanish stocks eased and financials gained as Wall Street set fresh records.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, October 2, 2017. REUTERS/Staff/Remote

The pan-European STOXX 600 index ended the session up 0.2 percent, with Germany closed for a holiday.

Spain's blue chip index .IBEX was flat in percentage terms as Madrid and Catalonia appeared to carefully weigh their next steps following Sunday's independence referendum, which the central government has declared illegal.

Catalonia’s secessionist leader called for international mediation while Spanish Prime Minister Mariano Rajoy said he was seeking a joint response to the crisis after meeting leaders of other political parties.

Sabadell and Caixa have the biggest exposure among Spanish banks to private sector loans in the wealthy Catalonia region, while Santander (SAN.MC), up 0.2 pct, and Unicaja (UNI.MC), up 1 percent, have the lowest.

Spanish utility Iberdrola (IBE.MC) fell 1.3 percent after JP Morgan downgraded the stock to neutral, saying political uncertainty in the euro zone country added to a list of headwinds, even though its Catalan assets are very small.

“We believe that the Catalan conflict adds uncertainty to the Spanish political situation, raising questions about the likely timing of elections ... regulatory decisions and the macro outlook,” JPMorgan analyst Javier Garrido said in a note.